bba 103 corporate presentation)
TRANSCRIPT
-
8/3/2019 Bba 103 Corporate Presentation)
1/19
BBA 103 CORPORATE LAW
Topic : Fiduciary Duties of Directors
Group Members :
K.GunasilanA.Prakash
T.Shanmugavadivelan
M.Shaarmini
Shahiddah Bt Zamzuri
Puteri Nur Qamarina Nureen
Muftiari Bt Abdullah
-
8/3/2019 Bba 103 Corporate Presentation)
2/19
INTRODUCTION
Fiduciary duties of directors were first elaborated
by common law judges, operating without any
guidance from the formal written law. Indeed, the company laws of the United States,
and many other common law jurisdictions,
contain no statement at all of the core fiduciary
duties of care and loyalty. The fiduciary duties of directors are continuing to
evolve, again without formal written law.
-
8/3/2019 Bba 103 Corporate Presentation)
3/19
FIDUCIARY DUTIES OFDIRECTORS
Fiduciary duty means that, as shareholders
guardians, directors must be trustworthy, acting in
the best interest of shareholders, and investors inturn have confidence in the directors actions
-
8/3/2019 Bba 103 Corporate Presentation)
4/19
DIRECTORS DUTIES AND FUNCTIONS
Directors duties and individual director
responsibilities are dependent on the particular
type of company, board structure and boarddynamics.
For example, a board of directors may delegate
certain matters such as executive and director
compensation to a committee that is chaired by adirector.
-
8/3/2019 Bba 103 Corporate Presentation)
5/19
DIRECTORS DUTIES AND FUNCTIONS
(CONT) The key function of the board is to manage the
business so that it is a success and shareholders
realize returns. A directors duties greatly depend
on how the entire board of director approaches itsduties.
-
8/3/2019 Bba 103 Corporate Presentation)
6/19
BREACH OFFIDUCIARY DUTY
Directors act as fiduciaries to the corporation, and
once elected must serve the best interests of both
the corporation and all of the corporationsshareholders, not just those shareholders who the
director was elected by.
-
8/3/2019 Bba 103 Corporate Presentation)
7/19
THE CORPORATE GOVERNANCE LITERATURE
PRESENTS THEFOLLOWINGFIDUCIARY DUTIES OFBOARDS OFDIRECTORS:
Duty of due care.
Duty of loyalty.
Duty ofDisclosure.
Duty of Good Faith .
Duty to Promote Success .
Duty to Exercise Diligence, Independent Judgment,and Skill .
Duty to Avoid Conflict of Interests .
Fiduciary
Duties and Business Judgment Rules.
-
8/3/2019 Bba 103 Corporate Presentation)
8/19
DUTY OFDUE CARE
Determines the manner in which directors should
carry out their responsibilities. Failure to uphold
the set stipulations may constitute a breach of the
fiduciary duty of care of expected directors.
-
8/3/2019 Bba 103 Corporate Presentation)
9/19
DUTY OFCARE
Act
Serve
DelegateAuthority
IndependentJudgment
Attend
Obtaininformation Rely on
Experts
-
8/3/2019 Bba 103 Corporate Presentation)
10/19
DUTY OFLOYALTY
Requires directors to refrain from pursuing
their own interests over the interests of the
company. Breach of loyalty can occur even inthe absence of conflicts of interest if directors
consciously disregard their duties to the
company and its shareowners
-
8/3/2019 Bba 103 Corporate Presentation)
11/19
DUTY OFDISCLOSURE
The justification for full disclosure before a
shareholder vote is obvious: Without good
disclosure, the shareholders may not know how to
vote
The justification for full disclosure of conflict-of-
interest transactions is two-fold.
-
8/3/2019 Bba 103 Corporate Presentation)
12/19
DUTY OFGOOD FAITH
Its an important of directors fiduciary
obligations, and any irresponsible, reckless,
irrational or disingenuous behaviors orconduct can breach that fiduciary duty
-
8/3/2019 Bba 103 Corporate Presentation)
13/19
DUTY TO PROMOTE SUCCESS
Directors should act in a good faith and promote
the success of the company to benefit of its
shareholders and other stakeholders. Includes:
approving the establishment of strategic goals,
objectives and policies that promote enduring
shareholders value as well as protect existing
value
-
8/3/2019 Bba 103 Corporate Presentation)
14/19
DUTY TO EXERCISE DUE DILIGENCE,
INDEPENDENT JUDGMENT, AND SKILL Directors should be knowledgeable about the
companies business and affairs, continuously
update their understanding of the company
activities and performance, and use reasonable
diligence and independent judgment in making
decisions.
-
8/3/2019 Bba 103 Corporate Presentation)
15/19
DUTY TO AVOID CONFLICTS OF
INTERESTS Potential conflict of interest may occur when
director: receives a gift from a third party he is
doing business with, either directly or indirectly
enters into a transaction or arrangement with that
company, obtains substantial loans from the
company, or engages in backdated stock options.
-
8/3/2019 Bba 103 Corporate Presentation)
16/19
FIDUCIARY DUTIES AND BUSINESS
JUDGMENT RULES Directors operate under a legal doctrine called
business judgment rules. Under that law
directors that make decisions in good faith, based
on rational reasoning, and an informed manner
can be protected from liability to the companys
shareholders in the ground that they appropriately
fulfilled their fiduciary duty of care.
-
8/3/2019 Bba 103 Corporate Presentation)
17/19
DIRECTOR LIABILITY
One way to influence directors ethical conduct and create moreaccountability for them is to increase their legal liability for poor
performance and business misconduct.
Directors are not reasonably expected to have first-handknowledge of all company business affairs under their oversightcapacity. Nevertheless, directors are responsible for ascertainingthe validity, reliability, and quality of information provided tothem. In most circumstances, directors make decisions by relyingon information furnished by corporate
officers, employees, and professionals, including legal counsel andaccountants. Thus, the effectiveness of their performance dependson the validity and quality of the information provided todirectors.
-
8/3/2019 Bba 103 Corporate Presentation)
18/19
CONCLUSION
In conclusion, being directors of a company,there are several fiduciary duties that theyneed to adhere to.
This duties can be found by following theprinciples in common law and whereapplicable, the Companies Act 1965.
All the fiduciary duties of the directors as hasbeen discussed above must be obliged by themand any non-obligation will render thedirectors breached of their fiduciary duties.
-
8/3/2019 Bba 103 Corporate Presentation)
19/19
THANK YOU